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    Industry expresses "relief" at Royalty decision

    News // December 6, 2002
    UKOOA says the UK oil and gas industry is "relieved" that the uncertainty over the abolition of Royalty has at last been removed following the Chancellor's statement that Royalty will no longer be paid by the North Sea's 30 oldest oil and gas fields from1 January 2003.

    Removal of Royalty will aid future investment plans for these fields which, with fresh injections of capital, could potentially yield up to an additional estimated 440 million barrels of oil equivalent (boe) of recoverable reserves.

    It also means that the marginal rate of tax paid by around a dozen of these fields will be reduced from 74 per cent to 70 per cent.

    New investment is important not only to extend the lives of these fields, prolonging production, jobs and revenues, but also because their infrastructure can be used to recover reserves in marginal fields stranded nearby.

    The removal of Royalty does not however heal the damage done to the Industry by the recent changes to the tax regime overall. The impact of the supplementary Corporation Tax charge introduced in April, even allowing for Royalty abolition and the 100 percent capital allowances for new investment, has been to increase the tax burden on the oil industry by some 8 billion by the end of the decade.

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